Signal transduction by G-protein coupled receptors is being studied using leukocyte chemotaxis as a model. Protein carboxyl methylation is a reversible posttranslational modification which may regulate the activity or localization of a number of proteins involved in signal transduction. Methylation of these proteins is increased upon activation by specific biochemical signals, and this reaction provides a novel target for pharmacologic manipulation of a variety of signaling systems controlling cell replication, motility, neurotransmitter release, ion channels, and cell-cell interactions. A. We have demonstrated a GTP-dependent methylation of several low- molecular weight GTP-binding proteins, in a reaction catalyzed by a membrane bound isoprenyl-cysteine methyltransferase. The low molecular weight GTP-binding protein, G25K/CDC42, was found to be a major substrate for methylation in brain. Methylation of soluble G25K is regulated by guanine-nucleotides and a guanine-nucleotide dissociation inhibitor (GDI) protein, rhoGDI. Only activated G25K is methylated and associates with the membrane. B. Isoprenyl-cysteine methylesterase activities in brain were characterized with methyl labeled G25K. The substrates were methyl labeled in reactions using the yeast STE14 methyltransferase expressed in E. coli. Several esterase activities were observed in brain homogenates. One of the soluble methylesterase activities was characterized and found to be cathepsin B, a lysosomal acid protease. Additional esterase activities, which were not inhibited by several protease inhibitors, were observed in both soluble and membrane bound forms.